Question23 In an efficient share market, which of the following is false: If new accounting information had been expected earlier it can still have a significant impact on share prices upon its release If new (unexpected) accounting information does not impact share prices now, then it has no incremental information value above other information currently available. New accounting information must be unexpected to have any impact on share prices Two of the other answers are false Unexpected accounting information that impacts share prices upon its release, will not impact share prices later if the information is later proved to be incorrect, for example due to accounting errors. ResetMaximum marks: 1 Flag question undefined

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Question to analyze: In an efficient share market, which of the following is false: If new accounting information had been expected earlier it can still have a significant impact on share prices upon its release; If new (unexpected) accounting information does not impact share prices now, then it has no incremental information value above other information currently available; New accounting information must be unexpected to have any impact on share prices; Two of the other answers are false; Unexpected accounting information that impacts share prices upon its release, will not impact share prices later if the information is later proved to be incorrect, for example due to accounting errors.

Option 1: If new accounting information had been expected earlier it can still have a significant impact on share prices upon its release.
This statement asserts that even information that was anticipated can still move prices when it is released. In an efficient market, if information was truly expected, its release should already be priced in, reducing its incremental impact. However, there are scenarios where the timing of release or revisions to previously anticipated data can surprise the market or reveal new context, causing a price move. The phrase “can still have a significant impact” acknowledges that anticipation does not always eliminate price impact entirely. Evaluateability: this option is not inherently false; it is plausible under certain market dynamics, though it challenges a strict interpretation of semi-strong form efficiency.

Option 2: If new (unexpected) accounting information does not impact share prices now, then it has no incremental information value above other information currently available.
This treats the informational value of an unexpectedly new item as entirely captured by price moves at release. In efficient markets, price impact is a signal of new information, but the absence of an immediate price reaction does not necessarily imply zero incremental information value; investors may later re-evaluate, or the information may affect risk assessments, forecasts, or require revisions that influence prices subsequently. Therefore, this statement is suspect and can be false in practice because information value can be realized over time or affect higher-order variables beyond immediate price changes.

Option 3: New accounting information must be unexpected to have any impact on share prices.
This is false under standard market efficiency theory. While unexpected information tends to provoke price adjustments, there are occasions where already anticipated information, or confirmed revisions, can still move prices due to new interpretations, confirmation effects, or violations of prior expectations. Hence the claim that it must be unexpected to affect prices is overly restrictive and incorrect in general.

Option 4: Two of the other answers are false.
This is a meta-claim asserting that at least two of the previous statements are false. If we identify that Options 2 and 3 are indeed false (as argued above), this meta-statement could be true. However, to determine whether this option is itself true, we must accept that there are two false statements among Options 1–3. Given the analysis that 3 is false and 2 is questionable (often false in practice), Option 4 could be considered true in that framing. The correctness of this option depends on the truth values established for Options 1–3, but as a standalone item it asserts a secondary conclusion about the distribution of truth values rather than a direct market principle.

Option 5: Unexpected accounting information that impacts share prices upon its release, will not impact share prices later if the information is later proved to be incorrect, for example due to accounting errors.
This states that even if initial unexpected information moves prices, later corrections due to errors negate any future impact. In reality, initial mispricing can persist for a period despite later corrections, and the ultimate impact on prices may depend on how investors revise expectations, assess credibility, and adjust risk. The claim is too absolute and ignores the nuanced dynamics of how price paths evolve after revisions, so it is generally false in typical markets.

Summary of reasoning:
- Option 1 acknowledges that even anticipated information can sometimes move prices upon release due to nuances in surprise, timing, or context; it is not categorically false, though it challenges strict efficiency.
- Option 2 asserts zero incremental value if there is no immediate price impact, which ignores potential delayed or indirect information effects on expectations and risk assessments; this is questionable or false in many cases.
- Option 3 claims that information must be unexpected to affect prices, which is too strong a statement and contradicts instances where expected or confirmed information still influences prices.
- Option 4 posits that two prior statements are false; if we treat Options 2 and 3 as false or at least not universally true, this could be consistent, but it depends on how strictly we interpret the previous options.
- Option 5 claims that initial price moves cannot persist after corrections, which ignores the possibility of lingering effects due to revised beliefs, making it false in most realistic scenarios.

Overall, the assessment of which is false hinges on recognizing that market efficiency allows for complex responses to information, including delayed, partial, or context-dependent price effects, and that absolute claims (must be unexpected, cannot have lasting impact after correction, etc.) are typically incorrect. The nuanced truth is that multiple statements can be false depending on how strictly one interprets efficiency and information value.

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